harry, during one of the breaks, talking about greece. you had an unconventional view, i think, of what's going on there. >> still tons of issues, major risks but i think finally some signs after five years of decline, it is starting to bottom. first, the eu demonstrated they will do anything to keep power, partly because he has made some progress and partly because the alternatives are scarry. finally seeing improvements in the budget deficit numbers. >> you are buying stuff? >> looking at stuff. finally start to see investors move in 2013. already seen government bonds in 2012 and i think you will see asset sales. >> you agree? you remember your name before -- >> that does it for us today. make sure you join us tomorrow. right now, time for "squawk on the street." good morning, welcome to squawk on the street. i'm carl quintanilla, melissaly, jim cramer. nyse euro net selling itself to

ice for 8.2 billion in cash and stock. david is here to break it down. >> go through some of the numbers four. the deal itself having been officially announced in the last half hour or so board signing off, call it about 8 a.m. eastern time. my sources tell me this all began a couple of months back when jeffrey spraker, the ceo of ice approached duncan niederauer, the ceo of the stock exchange about a potential deal. looking forward hearing from both men later in the program. as for the deal itself, if you're a new york stock exchange shareholder, mr. spreker built this account the past decade. 36% of the combined company will be controlled by current new york stock exchange shareholders. you get a premium.

also an opportunity to participate in the continued growth of what will be a trading ba he months. they trade stocks. energy, interest rates, commodities, agriculture, that's what it's bat. global platform for the trading in so many different asset classes, particularly as it relates to derivatives, putting these two companies together this way. cost synergy is very important. $450 million what they are looking for. say that will take place after the second full year, realizing all of them but almost 80% within two years of closing. that's related to technology savings. clearing duplicate expenses, one public company instead of two save money. there are going to be some job losses one would anticipate here as well. women see how ice shares do today, of course, a growth

company, so in growth shareholder sort of hands. will there be change today? people trying to figure out what do you do with the multiple? great cost synergies, slower growth, jim. so the question becomes what is the multiple of ice going to be in a year? 15 now is it 13? interestingly, the two companies do about the same number with ebidta. so clearly is a multiple differential enabling ice to be the acquirer waters its market value higher as a result of that hire multiple. >> nyx never cut the dividend. it has been bountiful. i want to talk about two words, upstart and venerable. what do you do about the idea a 12-year-old company is taking over a multiple 100-year company. what do you do, by the way, with this, all around us? is it just expensive overhead? >> it maybe overhead. it may be expensive, but not going anywhere. they are committed to this listen, politicians play an important role in these things have a dual headquarters, by the way, the company.

>> really? >> atlanta is where ice is based that will still be most likely where the heart of the organization is. >> okay. >> but they are talking about dual headquarters. duncan niederauer will continue to run the nyse. ellen president of this new company as well. >> cnn model? >> yes. >> exactly. >> dodd frank echanges have mor power. sunlight plan. >> derivatives, markets in particular something they will benefit from the creation of so many more exchanges or addition of a lot of different instruments. >> ice trading up significantly. >> yeah. that's very interesting. again, we know ice was interested in the derivatives business to begin with, the new york stock exchange. remember, they partnered with the nasdaq in that ill-fated bid for the nyse when the nyse had a deal of its own to be acquired by or merge with deutsche borse.

that much more a merger of equals. here, four board seats, expanding the ice board to 15 from 11 they will add four board members. no reason do this. this is an acquisition, not a merger over equals. >> all about the growth in the derivatives business, slow down in the cash equities business where the volumes are drying up, the margins are getting squeezed and we don't know when that business will return, several years or if there is a secular change in the way people trade now. this is the latest extrapolation of that story we have heard so much this whole year. >> these are all together the get-go deal for night. who has the power? who's the customer? who is going to make money off of trading? is trading equities just a vestige of futures? >> will it ever come back? will it ever come back? see normalized? >> ice want the equity business, david? >> they do >> they say they want it. say they are still in it.

euro next over in europe, they are going to potentially take public, not a part of their plans, per se, in terms of just including it. here in the u.s., they still want the straight equities business. der riff city was the key. >> people want to believe this is not going to be the latest in a chain of squelch deals, denied deals. you think this one -- >> this one does not appear to have any hair on it when it comes to antitrust. >> nationalism. >> two u.s. companies. two u.s. companies. unless you want new york versus atlanta. that could be -- >> we did that. >> atlanta, the financial capital of the world. not the same ring to it. >> oracle buys a company. yesterday, merkel buys a company. today -- >> angela merkel bought a company? >> play that out. the insurance business. gardner denver perhaps. david -- >> yeah. >> this is deal mania. >> mention arris, trading up

again, double the size of the -- what is happening? >> ge this week. >> potentially, the italian enginemaker. >> the fiscal cliff, result supposed to be frozen? aren't we supposed to be paralyzed? >> i guess the clock ran out on everybody saying we can't do anything? >> this is huge for us. >> i don't have a legitimate answer for you. none of these transactions are going to close this year, not a result of let's get something done by year end to avoid capital gains. >> something changed in people's attitudes, david. >> pent up demand for dealmaking that's been there. maybe a reflection that okay, going to get something done and so i feel a little bit better as a ceo in making a decision. but a lot of these have been in the works for some time but it is very interesting, jim. i don't have a straight answer. >> i'm going to buy -- i want to buy -- m and a, a huge profit.

coming back. of of >> common threads of stock using the deal the percentage of the total, people using the stock because they feel their stock is at a valuation i don't want to say is maybe peaking -- >> i haven't looked at the numbers but no appreciable increase in the use of stock in terms of deals as opposed to cash. we know that cash is extraordinarily cheap right now. we have been wondering why there wasn't more dealmaking. don't want to make too much of it. this is still going to be a very poor year for merger and acquisition activity. we will be speaking to the global head of m & a at morgan stanley at 10:40. we will ask him. but this does line up well for next year, when it comes to merger activities. we will keep a close eye on ice shares, stock exchange shares this morning. we are expecting to speak to the two gentlemen behind the deal, duncan niederauer, jeffrey sprecher, as well. you there see it >>

>> incredible all this is happening with the chaos in washington. >> do expect to close this deal second half. final question, the cme works they consider doing anything, coming in over the top? highly unlikely. my sources say because of anti-trust certainly in one way. didn't the first time when there was up potential. that is not expected. this deal is expected to make it to the finish line. one never knows. two shareholder votes needed. ice and nyse. >> fabulous reporting. first to get the deal price. well done. >> topic of conversation in this room this morning. as jim mentioned, futures on the rise a day after a concern about the fiscal cliff talks weighed on stocks. the batlogical escalate today. the house set to vote on boehner's so-called plan b. keep taxes from rising with people i incomes below $1 million in the event no deal is struchblg the president will veto the bill if it passes congress, he says yesterday, take me out of it take the deal.

that was followed by the speakers a famous now -- by now famous 59-seconders were. jim, your point about big changes of control, these big disposition of assets happening, corporate america decided we can't wait and not going to wait. >> corporate america decided let's turn those guys off, make some money, do things right. i was looking at the press conference, now come up with a new way to look at press conference. boehner come up, short the s & p. said listen, my advice to you you shouldn't talk there is no deal the other 99%, should say guys, short the s & p. president comes on, short am, right? isn't this what happens? what is playing out. every time one of the guys comes on acre the market goes down. hey, memo to speaker boehner and president obama, could you give us a couple days off so we can actually trade here? >> two straight days of gapes, the s and p fell the most in five weeks in yesterday's session. not like we have been saying the markets want to drift higher, immune to the headlines, at the

end of the day you watching this extremely closely in terms of the developments, will we reach that deal, 11 days and counting? >> people pointing to claims this morning, these very co-incident indicators, if there's no deal, you will see claims fight in a hurry, as businesses start to prep for what will -- what we can anticipate will be a back lack of demand. >> couple that with ex-spir rakes of the payroll tax cut, a lot of chat ber that this morning, an article in i believe the "journal" or "the times," average tax bill for a family, average household making $50,000 would be $1,000. taxes would go up by $1,000. most people in that tax bracket believe that their taxes won't be impacted. but they will. >> paid monthly, some people every other week. there will be two waves. this is my super bowl theory, that we will get a deal by the super bowl, because then everyone has got an paycheck and realized how little they make. i don't know necessarily who is going to be in the super bowl. i know one of your teams is not. but i do believe that things

will get resolved by then we don't get it done next week. one of the things that has always been the case in this business not supposed to have any news, a silent piece no downgrades next week, no blowups, but the president and speaker boehner don't seem to understand the ket of wall street. >> got other things on their minds. >> you think so? >> maybe. >> like the republic? >> let's talk about some of the tech news, we have a lot to contend with this morning. stern agee listing ibm one of the top picks for 2013 citing big blue's unique business model, recurring profit streams and underappreciated product ask. as for apple, bernstein lowering its price from $750 to 800 a schaffer the firm sees apple's ability to beat earnings expectations as less certain. on top of it, blackberrimaker research in motion set to report earnings after the bell. shares of r.i.m. have lost -- almost doubled in the past three months, after coming off of a

low there. where do we go first? we look at apple, for instance, premarket trade. >> this is the steve jobs/walter isaacson book. unless they have an omg product, won't like them. accenture last night, disappointing. i expected more frock accenture. accenture, ibm, oracle, and sap. accenture losing share of these companies? everyone feasting off of hewlett-packard's consulting business. >> a busy night for earnings,

r.i.m., nike, "journal" this morning talking about nike -- easy to forget wasn't that long ago, nike seemed immortal, seem they had could do no long. that changed in a hurry. worries about r.i.m., consensus is a loss of 35 cents. everything pipped, jim to this blackberry ten. >> one product, i think they have done a lot of rationalizing on the cost side. nike went from being this terrific chime story with north america not doing that well to suddenly, an inventory glut of shoes with china, maybe north america can make up with it. nike remains a great growth company, a lot of cash, good dividend. i think if it gets hit, unless they can -- remember, china is coming back. so, theoretically, that's what the stock market upped the most since august 2010, it comes back, then nike represents great value. when we come back this morning, a lot more on that deal of the day intercontinental exchange buying the nyse parent, nyse euro next, a live interview

with the ceos of both of those companies. meantime, take one more look at futures after the worst day of the month yesterday. futures rebounding a bit. a lot more from squawk on the streets, post nine, at the nyse, when we return. st

herbalife is one of the stocks to watch this morning after bill ackman says he is shorting the stock, calling you the company a pyramid scheme.

ackman will outline his herbalife argument at an investment presentation in new york city herbalife ceo defended his company yesterday on cnbc. >> this is about bill acman's business model. this appears to be an attempt to legally manipulate the market by short sellers. here is what we know, give it to you quickly. an extraordinary number of puts due to expire this friday. learned this activity was pegged at some kind of "significant event". >> mr. ackman suddenly announces he will make a presentation on herbalife on thursday, the day before the puts expire. now we know what this has been going on for, in the shadows, as we say is for the last eight months. this has been ridiculous, what's happening here. >> fascinating exchange of words and thoughts between mr. johnson and mr. ackman because after that interview, bill ackman talked to kate kelly and said he is not in any sort of options strategy. yes, there was unusual activity in the terms of the puts that expire this friday but as for mr. ackman, he says he is not involved with any of those.

>> is it possible that other people could be aware that he was going to do something like this? >> the question is that illegal? it is not. if bill ackman said -- if i'm bill ackman, jim cramer, imcome out with a neg tifr position on herbalife, you can go out and do whatever you want with that? >> yes. now, obviously, one of the things that you know about, there's a fomentation rule in 13 b. driving the stock down, someone to could say it is manipulation. johnson may not have his facts right. johnson has been on "mad money" a number of times. this is a total battleground. merrill lynch reity traits does make a lot of money. herb greenberg done fabulous work here. in the end, ackman is saying all they are doing is selling product from distributor to

distributor and that is a ponzi scheme because it doesn't end with customers, a la tupperware. >> 90% of the sales going out to customers, not staying in that channel. >> i want to be even keeled here, that johnson did come on, brian sullivan and mandy, go did come on street signs, didn't duck it did come out on the offensive, he was passionate in the way he defended his company. this, to me, is the old battleground. i really know that if individuals get in here, it's what i call int thintercity,al . >> look at the stock charts, multilevel marketing in nutritional supplements, same stock charges, new skin,

companies that continually draw the attention of short sellers because of their marketing model. whether or not there is any basis in fact, all thrown out at the same time. >> ackman, say he has definitive evidence a lot of product that never went and the lieberman study johnson refers to is wrong, obviously, i think the stock could get hit again. i think he better deliver something today after what happened yesterday. >> he is going to be on cnbc, presenting at the sewn conference, before or after his were presentation, might be around noon, before noon, all up to bill, happening this morning on cnbc. >> there is a synergy. people come on our network all the time and say they like x. i own x and i like x. here is a guy who says i'm short it and i hate it. so you could argue mirror image. that's fair game. >> all the same. last night on "mad money," cramer spoke about what your investment mindset should be

doing 2013, how should you make a money for profits in the session? jim's mad dash is next. later, the countdown is on. stick around to see which stock is among the worst traced of 2012. well, if it isn't mr. margin. mr. margin? don't be modest, bob. you found a better way to pack a bowling ball. that was ups. and who called ups? you did, bob. i just asked a question. it takes a long time to pack a bowling ball. the last guy pitched more ball packers. but you... you consulted ups. you found a better way. that's logistics. that's margin. find out what else ups knows. i'll do that. you're on a roll. that's funny. i wasn't being funny, bob. i know.

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13-year highs lately. >> jerry rod kin an amazing ceo, one of the best consumer -- one of the best consumer packaged goods men i have he ever seen. moving aggressively a private level. go to a supermarket, whole foods, cost co-you see their private label. conagra is going to be king of that slim jims, popcorn, a lots of good things, hebrew national. i feel this company is on the move, probably the most aggressive of all the packaged goods companies we see now. >>ed food business volume is lower, making up other ways? >> big acquisition, big road map, a big dividend. i have to tell that you this company was an also ran company. rod kin has reignited it. a lot of inflation costs, inflation's under control. i like this man. i think he has done a remarkable job. >> let's talk all scripts. >> a different one. glenn tollman out as ceo, not doing great job, he was trying to sell the company. it does seem to be one of these situations where a lot of

people, a lot of hot money was in it. this is a name in my sell block on "mad money." why? 'cause i didn't think that this business, which is again cerner is doing as well. this turned out to be a bust. i don't want people to come in, even at $9. a lot to cover, individual names we have not gotten to yet. when we come back, as we said, ice and the euro next up sharply after the big deal announced this morning. stay tuned for a first on cnbc with both of those companies. and shares on a roll since the parent of caldwell banker and century 21 went public two months ago. we will talk to richard smith about the housing recovery and what is at stake for his company. the opening bell is coming up next. don't go away. i always wait until the last minute.

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looks like a schnauzer, a small labrador. >> [ inaudible ]. >> they spend on their pets. one name we have not mentioned yet, bed bath & beyond, sales fall short and sandy keeps getting blamed. >> it is decelerating. people feel it is amazon or sandy. now getting cheap. 55, 56, i would not sell it. i feel like in the end, [ inaudible ] [ bell ringing ] there they are, at the opening bell. top of your screen is the s & p 500. down at the exchange, pet care brand u can tube in ba and canine companions for independence providing highly trained dogs for people with

disabilities.ompanions for inde providing highly trained dogs for people with disabilities. >> intercontinent, ice, a day -- what happened? there's a dog up there. >> what's the question? >> we used to -- the bell used to be big companies ringing. i mean, is this an anachronism, david? >> you want to come back to this? >> 200-year-old company gets bought by a 12-year-old company. is mr. mcdonald there? i don't see him. maybe is there a little irony here, going for an ironic touch. >> looking for significant cost savings in this merger. we have been saying 450 million. we take a look at dogs. 150 million of that is inclusive of cost cutting under way at the nyse, part of their plan to cut

$150 million in costs. as for the floor, i leave it to you to determine might be the best. we can ask both men, do seem committed to maintaining the operation of the floor of the new york stock exchange. >> behind you. >> there is some headlines also from ice. the equities business will provide solid earnings and good cash flow. there it is again. reaffirmation they are committed to the cash equities business, which is good news for everybody down here. >> dow jones, tremendous upside seen for stock trading. >> yeah. the operating margins, ebidta margins for both of these businesses, man, lucky to have them. still 50% of margins for the nyse. still a hell of a business. >> i agree. >> interestingly, cme group, still number one, combination make it a distant number two.

cme is higher today as well. so, not too much of an impact. >> trying to keep up with all the stories going on, supposed to be a holiday period. >> other acquisitions we talked about, arris group buying up -- >> a huge story. >> from google. arris 52-week high in today's session on the back of this acquisition. they are the acquirer. they are up more than 7%. fascinating how the deals are translated into the market. >> issuing 15.7% of arris will now be owned by google because they are not just buying this with cash. >> no. >> they buying it with stock as well. the purchase price alone in excess of arris' market value. >> $1 billion in excess. >> overall price tag. you can start -- take the 14 billion that google paid for motorola mobility.

now we can take it down by 2.3. >> what's interesting, david, over and over again, you swhad is google doing with a set top box? >> now we know. >> the answer, getting rid of it. >> oracle and ehlo kwa, acquiring ehloey, 871 million. you look at ehlo quarks wept public in august at 11.50 t is going out at 23.50. a timeframe of, what, a few months? >> certainly better than your cd during that period. all the e-companies that oracle had, incredibly good conference call. oracle a great acquirer and going to be, again, people will raise numbers, oracle. >> i will lumalumme minute nah. it is a 52-week high, up by 6.25%. >> just okay.

>> private equity going to china. i guess they are into private equity. do they have carried interest thing in china? >> all carried interest. >> the whole country is carried interest. >> all state-owned enterprise carried interest. >> retail, jim, is among the laggards today. bed bath the worst performer. mentioned that earlier. kohl's, macy's, target, penne, game stop, nordstrom. des started off a little soft. if claims spike up a bit, maybe the month doesn't end the way some people wish it had. >> gift cliff, way too warm, natural gas, what was the statistic you gave, an

anti-retail statistic. >> about new york city? >> yeah. >> 2012 on track to be the warmest on record. average temp, i think 57. 57 degrees. >> i don't wear north face when it is 57. >> our ugg boots. >> i think north face -- >> i don't wear ugg boots in any season. >> but do you have a combination of sandy taking out a lot of november, warm weather, what i call the gift cliff, falling off the gift cliff. we need some cold weather between now and next week. just -- >> coat sales? >> no, because clothing sales, remember if you are a department store, you take in all of these warm coats, you're going to have to discount them, sweaters, discount them. that's whyry think these things -- >> yeah. the plain states are finally going to get some snow. chicago, michigan, all those midwestern states, now bracing for a big storm but come a little bit late. >> global warming. that's what people are saying. >> let's check in with bob pisani here on the floor this morning. bob, have you met snoopy yet?

>> hey, no haven't met snoopy. everybody here distracted, i think a little news everyone is talking b try to answer issues, people want to know what is going on here. the deal reflectsed diminishing value of the stock trading business and the higher value of the derivatives business. when i say diminishing value, remember the nasdaq ice bid that happened in april 2011? 4253. today's deal, 3312. that's not lost with anybody. a higher p, market cap here. what is going to happen to the stock trading busy in know what they are saying what is really going to happen? a lot of the betting, they will spin off the european part of the cash equities business, retaint u.s. part. however, that does not mean that in the future, you couldn't having? happen. you couldn't spin it off, ipo it

in the future, even having current management retain control of that, a completely separate entity. some of the things talked about. what would be the possible buyer of the cash equities business? you think about it, a direct edge, competing exchanges. they want listings, said so. i can't imagine they would get the money to do that i think that would be a problem. the other obvious wires, the london stock exchange and, of course, the deutsche borse. all this is all still floating around here. answer a couple other questions, are there fewer players thought? it is a combination irk not a consolidation. ice is not an equities exchange. but it will definitely help the valuations. remember all of this consolidation, this wave of the consolidations a year, two years ago, a grinding halt when they fell apart. the singapore australia deal fell apart, nasdaq, ice deal fell apart, nyse deutsche borse fell apart. all the problems with regulators caused the deals to stop. now speculation that this will help overall valuations of these

exchanges and you may start seeing some more consolidation going on. that's, i think, the one side effect we are going to see here. what is the world going to be like right now? i think you are going to find intensified competition between the new york stock exchange and the nasdaq. for the nasdaq, for nasdaq, this mean a lot of opportunities. going to have an angle to argue that they have for years that the nysself. a dinosaur. see, they are moving in our direction anyhow. let's come with us and i think that's going to represent an opportunity for them. remember the nasdaq just acquired thompson's issuers service platform, a big thing. they provide press releases and investor relations tools for companies, a big thing, moving to compete heavily with the nyse on that front. how about the impact on individual investors in look, obviously down here, a good deal for individuals who are owning the nyse stock, average investor, i think the impact will be minimal. the bottom line here is company deal right now, most people here, just from a business point of view, view this as an

excellent deal. guys, back to you. >> thank you so much. >> good morning, jim. >> of course, everybody has been handicapping the selling that ensued and was sped up some extent with the conventional wisdom of a hawkish fed statement t has mod rated. >> the highest yield close on a ten-year 1.82 on tuesday, this move, still fell short by about four basis points of where the ten-year closed out last year around 187. so, you can see the chart, but here's what is fascinating. if you look at a one-month comp between our ten-year and the bund, that is rising. the bund rates are stubborn with the rates moving higher leads me to believe and confirms in my mind anyway that it is more of a year-end convenient. think about mutual fund flows this country, fixed income and

equities for 2012. all about the dollar yen, the bank of january two-day chart shows you as their decision was coming out, you see what the currency did, it really rally i had the dollar -- the yen rallied quite strongly. put perspective on t you taupe up to march we will, at the highest levels since april. wow, that's big. however, remember they are an export economy, not runaway from weakening the currency, that is the whole point, open up to a 20-year chart, boy, does that change the dynamics. . that would lead one to think, the dollar rallied quite a bit, probably a bit more room on this trade from a longer term perspective. melissa lee, back to you. >> thank you. coming up you can how will the merger deal transform the market landscape? we will speak to ceos in an exclusive next. we head to break, look at this morning's early movers. ♪

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welcome back to "squawk on the street." snoopy's over at the nyse. here at the nymex, watching gold, started a bit higher overnight. gold has sort of been acting in opposite reaction to the progress or lack of it on the fiscal cliff, but things turned down once again after we got that data this morning. interestingly, the performance for gold for the quarter earthquake the worst since the fall of 2008. and there are reports on reuters citing unnamed sources that that is having an impact on paulson's funds and he is seeing liquidation because he is so heavily weighted in gold that his hedge fund has performed poorly. as far as the rest of the commodities complex, seeing a move back, a number over these commodities are technically weak.

copper trading below both its 50 and 200-day moving average. silver on track for a sixth day of decline. finally, talked to the folks at cme to try to get a reaction from them with regard to that ice nyse deal no comment from the cme group. carl, i can tell you that certainly is the talk of the day here on the floor of the nymex and a lot of folks say it is a very impressive move on the part of ice. back to you. >> talk of the financial world. as far as gold goes -- >> interesting, already the apocalypse in new zealand and yet gold is plummet egg. does not make sense. six in 60, six stocks in 60 seconds. >> key assets, 6 billion, the balance sheet and make it better, but lost 31% of their production. >> paychecks missed on revenue. >> the company on tonight. does have a 4% yield. paying to you wait for a turn in the economy. don't have one. >> barclay's buy on home away? >> people understand this is bed and breakfast.com.

i know this because this is a principal source of all our bookings at my inn in summit. >> black rock, jpm black rock? >> yeah, there is a tremendous amount of money coming to these funds because of the change in the fdic rules, i think an inexpensive stock. >> merck? >> a terrific statin drug, people looking forward to them doing this statin combination, not going to be applied. a lot of people take statins, a big move to keep cholesterol longer. >> jay bill? >> have them on tonight. maybe it is back, contract manufacturer, they are doing demand manufacturing and a duel on health care now. kenny main. >> mad later, you are not going anywhere, right? >> right. >> stick around. coming up, ceos of the nyse and euronext on their big deal. ♪ [ male announcer ] you build a reputation by not breaking down. consider the silverado 1500 -- still the most dependable, longest-lasting

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welcome back to squawk on the street, joined by jeff sprerk, ceo of intercontinental

exchange and duncan niederauer, ceo of the new york stock exchange. a cash and stock deal worth roughly $33, a bit more now, per new york stock exchange shares, given ice shares are actually up. gentlemen, nice to have you here on the floor. duncan, let me start with you. >> sure. >> my understanding is mr. sprecher approached you a number of months ago, conversations began. when he approach ready you at the time, give pun the previous history where you have been part of the potential hostile for the new york exchange, why did you say, all right, i will talk to this guy and what were you thinking when the approach was made? >> a lot of questions in there first of all, we have known each other for a long time. we like each other and i think our attitude is business first, right? so it was business last year. i understood why jeff was doing what was doing. he understood what we were trying to do we have been friends, we stayed friends and if we put our shareholder value creation hats on, this was an easy discussion to have, right? we always thought we would be good partners for each other and the timing was finally right.

so this is very friendly. >> why was the timing right? >> i think from our point of view, the timing is everything in all this stuff, right? we both tried in the last 12 to 15 months to do other things to change the trajectory of our companies, they hadn't been successful that doesn't mean you shy away from continuing to try and we thought the complimentary nature of the two portfolios this is something we have talked about on our board a long time as a possibility. when it was spreentd, it was pretty easy to digest. i think in the environment we are in now, where scale continues to be an imperative and both thought consolidation was inhe have jet table, why not team up and see if we can do it? >> your share holders are rewarding you you the stock is actually up. but there are questions, jeff, about your multiple given what may be sloezer growth as a result of this deal. how do you answer those? >> well, we are a growth company in the way we act and the kind of share holders that hold us. and what we see is a tremendous amount of value that's inside the new york stock exchange. us to, we are looking at equity trading that's at, you know, recent historic lows.

we see a lot of money on the sidelines that's waiting to come back in once we have better policy, once we have a little more certainty in the world. we see we are in a zero interest rate environment and interest rates a big part of the trading. >> interest rates a big part of this deal in some ways why is that? >> because if you look at sort of the largest asset classes, the trade, in addition to stocks, many people don't realize that interest rates are traded a lot. obviously, hearing about libor in the news these days, i can liquidity policies going on keeping interest rates low but people will have to manage interest rate risks as those interest rates rise. we want to get ourselves positioned for that what we think is an eventual growth and take advantage of it. i'd said on my call with my share holders this morning, we want to spring load this company as these trends come back into the market, we can really accelerate. >> what does that mean by spring load egg? >> we have got to get ourselves organized, we have got to plan how we can come together. we have been working quite a

while on how these businesses could join each other. we think we can affect that pretty quickly. as you know duncan quite well, he's straight shooter, we have been able to really lay out a road map that we think that we can affect so, this isn't a merger where we are hoping that certain things will happen. we really have a strong plan how we are going to take costs out, how we are going to integrate the businesses, how we are going to be prepared for the next business cycle. >> i know jeff as well, a pretty straight shooter, duncan. they have done an awful lot of deals and a lot of companies we hear about. integrating deals is very, very important what gives you the confidence on their past deal making you acted integrations they have done that this can work as well? >> i think it starts always with people. i think the track record is interesting and both of us i think certainly is a good track record of integrating businesses. i think the challenge is it starts with people. if the two of us believe and we have the same plan and we cascade that to the people, which we have already done, you're not going to find a lot of daylight between the two of us. we have always thought consolidation of the derivatives

platform is important. it solves a big, complex issue for us on the clearing side to combine our interest rate complex with ice's largely energy and commodities platform and we are both very committed to keeping the nyse floor, keeping the nyse brand, continuing to have new york be one of the focal points of the company and going to be like any other multinational company. going to have a big presence in a lot of places. give than the two of us are on the same page, i'm not worried about the integration risk at all. you agree with that? >> totally agree. >> confident you can get this thing done? atlanta, new york, which is it really going to be? where is the real power of this company going to lie? >> first of all, ice has a very big footprint in new york. i happen to live in atlanta but i'm here every week. so, we run a global company -- >> you do know this is the financial capital. it s and if you, by the way, ever want to own -- >> no offense toal. >> you ever want to own a brand in the financial services

industry, this is the brand. and i do come from atlanta, where coca-cola and home depot and cnn and other strong brands reside. and so i realize the power of a brand. >> what gives you the confidence? by the way, a $450 million cost synergy number is what you are using, includes 150 million you have got under way, correct? 300 million is the real number, cost synergy? >> i think in fairness, we are looking at what duncan and his team are doing and we have -- we can rejigger some of the parts and things that they are doing to make it much more certain at that 150 that they are already working on will come out of the deal. so oh you know, in fairness, i don't think the market has rewarded nyse euronext for the cost savings that they have planned. i think as we articulate how we can do that together, the market's going to see that these are actually real and can come out quickly. >> how many job cut russ we potentially talking about, duncan? >> we know we are going to be asked that lot. you think about it coulds because of the complementary

nature of the portfolios, ice isn't in the businesses that we are standing in the middle of right here. so very little in that business. ice isn't in the businesses of the european equities business. so, you would assume a lot, i said to my own team this morning, obviously combining you the two derivatives platforms in europe, a cost takeout there the 150 we have already got and a lot of the other things comes not so much from job cuts but, for example, we don't need two boards we don't need two auditors, we don't need two this, we don't need two that. you will find a lot of the corporate costs will naturally fall out as they would in any merge. i don't think you're going to hear us talking much about job cuts, particularly over here, because it is not going to be about that. and i think that's -- i think that's -- that's an honest assessment of where we are right now. >> you agree with that? people here shouldn't be worried? >> shouldn't be worried. in fact, they should be thrilled. we are going to really use this now as a center of the brand of what we have. this is the most important brand, the most important business in the trading space. very few of your audience

probably have ever even heard of my company, frankly. nobody has not heard of new york stock exchange. so we think just that alone will help open global opportunities for us that ice hasn't -- >> called the combined company the new york stock exchange? >> we don't know what the combine is yet. >> the names. you guys -- >> we did this -- >> put our pencils down about an hour ago. >> gentlemen, i appreciate your time. thank you. jeff sprecher, duncan niederauer, send it back to you you carl. philly fed, existing home sales and lei, breaking news on all three economic reports and the market reaction at the top of the hour. lt minute. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express by december 22nd for christmas delivery.

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it's another reason more investors are saying... [ all ] i'm with scottrade. welcome back to "squawk on the street." we have december, the last three of the year on philly fed that manufacturing activity, a big surprise. looking for down two or three ended up with up 8.1. that is the best read since april. if you look at the entire year, the range was minus 1660, that was june, the weakest. the best was march, up 12 and a half. now, look at leading indicators that is a november number, spot on with the negative expectation minus .2 and indeed it is minus .2. we didn't see a whole lot of

movement on the equities on the interest rates based on these number bus philly fed is a good way to finish up the year, at least on that index. now going to toss it back to carl. >> a lot of information there. increasing home sales jumped 5.9% month to month in never, well above expectations of maybe 2% gain. seasonally you an annual rate of 5.04 million, from a slightly

downward revised october 4.76 million. the 17th consecutive month of annual gains. sales are the highest now since november of 2009, but that was a blip due to the home buyer tax credit expiring. take out that one-month blip, the highest sales pace we have seen since july 2007. slight gain due to a low inventory out west. speak of inventory, 2.03 million homes for sale nationwide, down 3.8%, month to month, 23% a year ago to a 4.8-month supply, the lowest since september of '05. that is good for prices. the median existing home price in november, 180,600. that is an increase of 10.1% year-over-year. but remember, this big jump is due largely to a change in the

median mix of homes selling. sales of homes over $750,000 up 50% from a year ago. sales of those under $100,000 down 4% from a year ago. so again, the big jump, 5.9% month to month in november. guys? >> thank you very much, diana olick. we should note that the home builder stocks made a little bit of a turn around on those numbers. get reaction to those better-than-expected existing home sales numbers. bob pisani joins us now with the man who runs the big pest real estate firm in the united states. >> rich and smith. thanks very much. chairman, president and ceo of realology. thanks for joining us. you are in your headquarters in parsippany, new jersey. must be a happy man. good numbers here. sales highest since november 2009. price is up. your reaction? >> bob, these are very good numbers. again, a clear indication that we are in the early stage of a

housing recovery. they are very, very strong numbers. >> particular lynn ceased with the increases home but study home price. still something like 10 million homes under water, they have more on the mortgage than the home is worth, but this has got to be very helpful. eventually the 10 million homes come down, continue to see the price increases. is that correct? >> that's correct. in fact, in core logic, a data service for real estate, in their september report, they indicated a 5% increase in sales price would relieve 2 million homeowners of that negative equity position. presumably, those 2 million home owners can come back into the market as inventory, indicated by danni idiana, a natural part correction process earthquake not a surprise to us. demand is outstripping supply and price is responding to that. so, this is as it should be if you are in early stage recovery which we strongly r. a modest rise in prices,

richard, maybe 5%, of those 10 million homes, significant portion may go in the money that would be helpful, would it not, for consumer sentiment and people's attitudes in general? >> yeah, they are cleaning up their balance sheets. i think that's important again, for a 5% increase in average sale price, 2 million of that 10.8 would come back into the market. they are no longer a negative equity positions, they can sell their homes. consider out of the 10.8 million, that ranges from being underwater in equity flat to 25%, 5% increments, the vast majority of those home owners are going to go back into the money and be available for inventory in the not too distant future. >> distressed homes still about 25% of all sales, my understanding, richardsome that continuing to come down? it was in the 30s a year ago. what's a number that you think we are going to attain in the next year or so? >> i think distressed sales i think are a little lower than

that around 22, 23% of the market. that's going to continue to decline. there are fewer homes that are in distressed positions. i think it will revert to the norm at some point, which is about 5 to 6% of the market. >> mr. smith, a quick balance sheet question from me. i mean, you know, you're upped by private equity until not that long ago. average cost of interests i think is in the mid-7% range s there an opportunity you see to refinance some of your outstanding debt and if so, what will that do to your ability to generate cash? >> you're right. we reduced our debt by about 40%, our interest expense by about 50% at the ipo. there are no near-term maturities we need to worry about our cost of funds is about 7.8%. there will be more than adequate opportunity in the future to refinance. again, as you heard in our ipo, our primary goal is to pay down debt and i can say that three times 'cause that's the emphasis we have placed on paying down

debt. so that will come in due course, but again, there's no near term maturity problems for us. >> can you give us a senses as to your leff ram to home prices, for every 1% increase in home price, for example, what does that mean for the company's cash flow? >> that's an interesting question. 1% either size or price, cause we are paid on the average sales price. we are paid on sales volume. we have indicated in the past that ranges from about 11 to 12 million at the ebidta line, fairly mature. >> can you give us some indication what, if any, affect has sandy month northeast? talk about mortgage rates in 2013? we have seen bond prices come down in thes last month or so, that might lead to an increase in mortgage rates in 2013.

>> they are extraordinarily attractive now. that has given try the sales activity we see now. people are i'llizing the rates aren't going to be here forever. the mortgage rate front, very good shape this year, i assume very good shape next year. as to the hurricane, we were very concerned as most businesses in the path of the hurricane, it has not had an impa impact thrust far. we were very surprised both on unit volume and also price. we expect there will be a delay and a deferral of closings so it is about probably going to be timing at the end of the day. the exception would be homes destroyed. >> any comment -- we have to let you go comment on your stock price, up 50%, one of the winner ipos this year? >> we are very thankful. we try not to pay attention to

that focused on the revenues and earnings and let the market determine what the price will be. we are very pleased. >> richard smith, thanks very much. appreciate you joining us. >> thanks, bob. right after break, a double dose over storms are brewing. talk the latest round of fiscal cliff negotiations and winter storm. how do that affect your holiday travel plans? still ahead, a tale of two tvs. why one streaming player could be the death of ampple tv. the details later on.

back to the latest news out of washington, house speaker john boehner calling a vote today on the so-called plan b, hoping the vote will raise pressure on the president to make some concessions. chief washington correspondent john harwood is in d.c. with the latest. we can only hope today is as interesting as yesterday was, john. >> yeah, maybe a little bit more blow ducktive as well. what we have got john boehner trying to -- facing resistance within his caucus, trying to rally them to a position that -- of political safety as against president obama. so what he has got with plan b is a two-part approach. one has about 200 billion dollars in cuts too avert the sequester, which would hit the pentagon very hard, something republicans don't want. it's loaded up with politically volatile things democrats could never accept, cuts to food stamps, cuts to obama care, that sort of thing. then he has also got a tax cut for everybody under $1 million in income. so, that extends the bush tax cuts but for many more people than the president wants to.

he said he is going to veto this approach. this it is a challenge for the speaker to get the votes to pass it because many republicans don't want to go, carl, for any tax increase for anyone, including millionaires, but this is a step in the process. i talked to one member of the business community who went to the white house last night for a session with senior officials at the white house. they were saying, look, we want you, business community to help us rally republicans to support a balanced approach. we don't want to go over a cliff but talks have taken a grim turn. they want a comprehensive deal and we will see whether or not that is effective. only a few days left before christmas and then we have got a few days after that before we go over the cliff, carl. >> has grover norquist blessed plan b and why would he if it formalizes rate hikes on some americans? >> he's partisan who wants to help republicans and trying to give cover, political cover for

republican speaker of the house. he is accepting, by doing so the argument that democrats have made about their much larger tax increase that is to say since current law has tax increases scheduled to group on everyone, the democrats are saying you are not really raising taxes if you allow those tax cuts to go away for people over 250 k. groverer norquist is saying that reasoning is fine but for a million and over. why? the republican is speaker pressing a plan. interestingly, the club for growth, a supply side group, very active on this issue you has not blessed that plan. they have stayed is a tax increase and not only is it a tax increase, is a precursor to a larger tax increase. you have a split within some of the activists in the republican party, split within the republican caucus and fundamentally, off republican speaker who wants to make a deal with the democratic president. got see if he can bring his troops with him? >> amazing to watch some of these caucuses begin to fray.

john, we will come back to you later on. thanks. a major winter storm wreaking havoc across the central plains. draco could make traffic difficult this year. bring in mike seidel in the dells, wisconsin. mike? >> reporter: good morning, melissa, here in the midwest, we have had eight inches of snow. west of here, des moines and omaha, a fwhoochlt we don't have here that they have had are wind gusts over 50 miles an hour. we have blizzard warnings up, now for later today and tonight in parts of seven states. we are going to have whiteout conditions. now, the roads out here aren't in bad shape, they have been plowed and plowed and plowed again. look across to the open air yaws here between these hotels and you get a sense of the wind right now, about 15 miles an hour. but imagine -- imagine a gust of 45 or 50 miles an hour. so, he is there a going to be treacherous travel across a wide area, including interstates 90, 94, coming out of chicago, toward minneapolis and across the plains later today and

tonight. speaking of chicago, already at o'hare, melissa, 140 flights have been cancelled in and out of that airport it is raining there or has been raining, the low 40s. once the cold air goes in, it is going to be a nightmare at the tail end of the rush hour through this evening. wind does clock in on the lake front 50 to 60 miles an hour and they will finally get their first measurable snow. the latest on record. also, their snowless streak of 290 days, another record, will end, too, around 5 or 6:00 this evening. this storm will move east. we will have snow down from the lakes into the mountains of west virginia, western maryland. for those of you back in new york, philadelphia and boston, a little bit of rain, maybe some thunder tonight and tomorrow morning but then the realism. pangt on air travel will be tomorrow and saturday. it will be very, very windy and as you well know, melissa, you have a lot of wind around new york stained those airports, there are sometimes long delays.

back to you. >> mike seidel, thank you. will research in motion's earnings take the wind out of their runnups in what you need to know add hehead of the quart reports. a better time to take a look at the worst trades of 2012. we are naming names right after the break. [ male announcer ] when it comes to the financial obstacles

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over the next couple of days, we are counting down the best and worst tried to have 2012. our scott wapner krufrnld some through put together a list and going to start, scott with one of the worst, right? >> is definitely one of the worst, carl, thanks so much. going to walk down the wall there it is the logo right there it is best buy's. best buy's stock price today, when you look at it hard to believe that shares pushed $30 back in the spring but that's exactly where it was and oh, how it's fallen since. there are many reasons why this all has happened. the company posted a loss for the third quarter. cash flow is dropping. amazon continues to take market share. and if that weren't enough, margins are tanking. want more? best buy's founder, richard schultz, the company's biggest shareholder, near 20% stake

wants to take the company private. questions remain about his ability to line up financing. as that saga drags on, the stock continues to suffer. just this week, schulz and the board agreed to push off the timetable for a bid, meaning the uncertainty over this one will only continue. melissa, back to you. been a tumultuous year for best buy shareholders. >> fun story to talk about though, that's for sure. thanks, scott. strong sales driving one stock higher. head to brian sullivan for a quick market flash. brian? >> driving you was the pun that maybe gave the clue to car max, kmx. that stock is higher, more people buying new and used cars. sales continue to rise. pricing also getting better. although average used car prices were about the same as last quarter, things keep ticking up. this is the third year of revenue growth for karma and that stock is at an all-time high, backs to the ipo in 1997. guys, do you know who car max used to be a part of? who were they a subsidiary of since from 1997 circuit city.

>> i don't remember. >> oh, that's right. >> hard to believe, car max is still around, too. >> yeah. all right. brian, thanks for that. love trivia, too. it was once the world's most hated currency, now looks like perhaps it is the most loved. the euro ticking higher again today, hitting an eight-month high. so how much more can it run? let's hit "money in motion"? editor and chief of the bush update newsletter, andy, good to see you. >> thanks for having me on. >> are we still range-bound here? >> well, i wouldn't say we are range bound. we continue to put in new highs for the your role yesterday, we were at 133.10. you got a great opportunity last night to buy a dip in the euro. we were down around 13190. fantastic. the strategy you want to employ as you still don't have any final outcome on the fiscal cliff. the markets anticipating positive thing happening. continue to buy risk until you get the announcement. >> i guess what i made by range-bound, andy, a defined

upward channel for instance, where it hits a certain level on that channel and you're shorting it and it hits the bottom and you're buying it? >> well, we have about. the upper channel was around 131.75. we broke that out just earlier this week and that's why i've shifted my strategy from playing that range to just going with a buy on dipped strategies. i know it is not rocket science, but sometimes in the currency markets you can got keep it simple, stupid. this is one of those cases. >> if it works, it works. what's the trade, andy? >> exactly. ton buy dips. my strategy is, you know, 13180, leave a tight stop at 13130, looking for, you know, upside of 13325, somewhere around there, but adjust this thing, keep buying until we get an actual announcement. then we will see maybe just a little bit of a rally. at that point, you may want to turn around and sell it, try to take some risk off the market there, because the market is anticipating this convenient. so these kind of the way i want to play t definitely not quite

your range trade but kind of an adjusted range trade, buy dips and then maybe selling the news, we get an announcement on the deliver. >> andy, good to see you, you see you friday, "money in motion," 5:30 eastern time, check out our currency class on our website you "money in motion" cnbc.com for more on the basics of currency is trading. coming back, breaks news on nat gas inventories and morgan stanley's global head of m & a, what a day to talk to him. let's give thanks -

for an idea. a grand idea called america. the idea that if you work hard, if you have a dream, if you work with your neighbors... you can do most anything. this led to other ideas like liberty and rock 'n' roll. to free markets, free enterprise, and free refills. it put a man on the moon and a phone in your pocket. our country's gone through a lot over the centuries and a half. but this idea isn't fragile. when times get tough, it rallies us as one. every day, more people believe in the american idea

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one hour into trading, 10:27 here on wall street, 7:27 on the west coast. a rebound in mid-atlantic activity. the philly fed index back in positive territory, 8.1, up from minus 10.7 in november. shares of conagra jumping to 52-week highs. the food company postbetter-than-expected earnings and raising guidance for fiscal 2013. and average rate for the fixed

mortgage, 30-year, 3.37%, according to freddie mac. all right. a couple minutes until we get eia numbers on nat gas. go to bertha coombs, watching not just the energy complex but also what's happening to gold today. down some 22 bucks. >> yeah. yeah. it's really an interesting thing. it has been lately when you talk about gold, when the lopes up for the fiscal cliff, gold is down. today, we are just seeing some liquidation overall. as far as natural gas, natural gas again also being the opposite. today was down, yesterday, bouncing this morning, up about 2%. certainly the fact that we are seeing that snow in the midwest, saw poor mike seidel thought in the snow that is helping. also seeing heating oil now coming off of the lows, moving into positive territory this morning. as far as the number coming up here in just a minute or so the expectation is for a withdrawal of 74 billion cubic feet that's below the number we saw this

week last year, about 100 billion cubic feet and well below the five-year average about 140 billion cubic feet or so we all know the story. we have a lot of natural gas production, a lot in storage and that has really been an impediment. last week, we saw a total injection of 2 billion cubic feet's, bit of a surprise. the number due out here now in 20 seconds. look at the oil today, we have come off of the lows quite a bit. we had a real strong move. it was headed toward the 200-day moving average, a lot of folks looking at the technical move we saw in wti, nymex this morning, seemed to have failed. now we are under pressure as far as wti and brent. and here is the number coming out. the bell has running. there we go. bigger-than-expected 82 billion cubic feet withdrawal. so, we are seeing more strength here in natural gas as it moves up and that is also helping heating oil here as the we move

up. we are finally starting to see some of that winter weather kick in. carl, back to you. >> bertha, thanks so much for tap dancing a bit and bringing us those numbers, bertha coombs over at the nymex. david, over to you. >> thanks very much. the viewers know the intercontinental exchange announcing the noon buy the new york stock exchange, 8.2 billion in cash and stock this morning, the deal announced. what is going on with all the deal making? otherwise august lackluster year for m & a. our next guest says dealmaking poised for a comeback in the new year. he is rob kind letter, global head of mergers and acquisitions at morgan stanley. nice to have you back. >> good to be here, david. >> suddenly seeing a spate of dealmaking. i don't want to make too much of t seeing fairly significant transactions the last part of the year. why? >> these have been in the works for a couple of months. people try to time deals to get done kind of at the end of the year. >> announcements. not going to close any of these. not fiscal cliff related?

>> not at all. these aren't driven by tax law changes. these things have been in the works, strategic deals. this deal announced this morning with ice and the new york stock exchange, obviously a visionary deal. my perspective it is interesting. last year i was advising the new york stock exchange on its other side of a bid by nasdaq and ice, big issues because of the listing side of it. >> helping them on the defense of the hostile bid while pursuing the deutsche borse. which fell apart. we did see that deal today. not too make too much of it or a sign that 2013 may be an up year versus 2012 for m & a? >> absolutely a sign. you look back last year, just around this time incredible volatile knit markets. last year, having literally in november and december, 500-point swings up, 500-point swings down. volatility is lower. very few conversations last

year. now, everyone is talk. >> i have been hearing so much about uncertainty. i have other guys do what you do at other -- at your competitors say, fiscal cliff, uncertainty, keeping everybody on the sidelines. nobody with the panache and style. they are saying the same thing, swifr somebody froze. >> in certain degrees, you take a look going forward. deals will make total sense from a strategic side, like ice and new york stock exchange, they will pull the trigger. i think the first day after the new year will be good. >> a lot more conversations this year than a year ago, hence you are expecting a big upturn? >> yeah. yeah. >> something else we have talked a lot about is the lack of leverage buyouts. i don't want to say there

haven't been any, but given the environment where money is so cheap, you have funds that are sitting on unused cash, leverage buyout, why haven't we seen more and again, going to see more next year? >> i think it is a little surprise. seen deals, some done, du pont deal was of size. most of the deals done fairly small in size. i actually think what's happening is that the strategic buyers are back. it is much, much harder for the private equity guys play when strategic buyers are back. that has been some of t also, not going to -- when it does come back, not going to see deals of any significant size, 'cause the equity check has to be much bigger. >> i have been hearing, that always comes into play, expectation of the searle versus the buyer. have they -- a lot of times haven't adjusted appropriately to where we are in the market. that still the case as well in your opinion? >> i think a little bit more reality than in that, but also was another reason why i think m & a is going to be very good

going into next year, overall valuations, look at the s & p, who knows what the earnings are going to be, the multiple of earnings is fairly low in the market. sitting here now and you say less volatile knit the market, valuations are fairly reasonable with the s & p. lots of cash available. financing available. and most importantly, no other way of getting growth, if you are a strategic company now, you cannot get -- >> go off the fiscal cliff, all bets off? >> we are not going -- i actually have a pretty strong feeling that come january 1, we will still be here. >> i yes, i think we will be, too. quickly, activism. that has been an important component of the landscape in the last year. will it continue to be? >> i absolutely think it s and a lot of what the activists have done the last few years i think has been good. it's caused companies to really focus on core businesses. we have seen lots and lots of spinoffs. not all of them are activist

related. >> usual loly on defense agains that. >> spend 60% of my time. >> that guy, kind letter, always go back to the same playbook, like it is the '90s with him. lipton, come on, we are operational now, we have a lot more insight. you know, where's the respect? >> well, i hope the playbook is that we actually succeed on the other side of activism and success is defined as doing the right thing for shareholders. i think the problem that people have had in responding to shareholders, lots of companies have done things in response that haven't been rational, overlevering and buying back stock. some times they do things good for shareholders in response to activism. overall, activism has been good, sometime these get it wrong. one thing is for sure, it is going to continue big time. >> rob kind letter with an upbeat forecast. over to you guys. >> thanks, david. speaking of activism. breaking news here on shares of herbalife, down 4% now off a fresh 52-week low.

bill ackman speaking moments ago. kate kelly is back at headquarters with details. kate? >> thanks, melissa. i have been listening to ackman's remarks now, halfway completed, as you noted, herbalife shares took a huge dive 30 or 45 minutes ago after the some comments ackman made in which he basically unveils how he intends to argue and in the midst of arguing through an analyst at pershing square, his company, that the company is, in fact, a pyramid scheme. take listen to this it is not terrific quality, but it is life footage of what ackman says. >> herbalife overstates retail sales, recruiting words are substantially greater than the retail profit they generate some, this massively inflated suggested retail price number and again if you think back to the earlier slides write show that the retail price of the product was three times, four times, two and a half times the commodity competition, again this is the way the scheme has largely been concealed.

>> those comments are key, guys, because ackman is essentially trying to argue that, in fact, herbalife fits the classic definition, ftc economist definition, full you of what a pyramid scheme is, which is to say the bibusiness model is based on a business opportunity essentially distributors hiring more distributors of product rather than actual retail sales. in order to be pyramid scheme that has to be the case but ackman argues and he has got a lot of evidence that he is trying to back up this argument with, melissa, herbalife inflates the retail sales to make them seem like a bigger bucket of revenue than, in fact, they are. >> fascinating the war of words that happened yesterday, kate in terps of acman versus the ceo, mr. johnson, but mr. johnson was very clear when he said 90% of the sales happen outside of that channel. when you spoke to ackman after that interview, kate, how did he respond to that? >> you know exacman didn't respond directly to that question yesterday. he just wanted to straighten out what he considered to be a misconception about this short sell or gangup, the use of

options which expire tomorrow. so, basically, the short conversation which had him dealt with that but i think we will probably hear more about this outside of the network sales number that johnson gave us yesterday and so far, essentially, ackman is saying it's bogus that, in fact, most of -- most of the revenue comes from these -- this chain of business distributors, not from the retail sales. the sales numbers are inflated. when i walked away just now to get on camera, his analyst was speaking about the actual price at which some of their more popular prod dunlgs sell on ebay and in through other outside channels and he is, i think, make you can the case that, in fact, those revenue numbers cannot possibly be what herbalife argues what they are because they are sold at a massive discount. melissa? >> thanks for that of course, you will continue monitoring bill ackman's presentation going on in new york city at the ira sewn conference and cnbc will be speaking exclusively to bill ackman. >> not sure it is exclusive but

he will be on cnbc first. person who invented the dvr is here to tell us why his latest ask set to win the streaming showdown against apple tv. the ceo of row cue joins us live in a moment. customer erin swenson bought from us online today.

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welcome back to "squawk on the street." blackberrimaker research in motion reports quartzerly reports after the bell and the stock doubled since the last earnings report but not because wall street is excited about the numbers we are going to see today. blackberry maker expected to report a loss of 35 cents per share on revenue of $2.7 billion. that's roughly half the revenue r.i.m. reported in the year-ago quarter, when the company was profit. an the reason for the excitement is that r.i.m. exec spiffs have been showing off blackberry 10, the next generation operating system the company will officially unveil on january 30th. the tricky thing about this for r.i.m., likely toibt tone and details around blackberry 10. from what i'm hearing, r.i.m.

might not be shipping you blackberry handsets based on the new operating system for a month or so after the actual announcement >> i wonder whether analysts are overly optimistic about the uptick for the february quarter. another tricky thing for r.i.m., torston hines says phones with blackberry 7, current os, will represent the vast majorities of shipments for several quarters after the launch in part because of a manufacturing ramp and the firsthand sets too expensive to be in reach for much of r.i.m.'s install base f r.i.m. is managing its workforce cuts effectively, discounting legacy phones enough to avoid losing too much share but not too much, hey, they still got a fighting chance. they have got a heck of challenge from the i phone 5 and android phones out there everyone loves an underdog, right? right you carl? >> depends. it depends on which way the stock's moving. that's for sure, jon. jon ford joining us from san hose from apple tv to row kurk the way we consume media in this country is shifting to one where the consumer decides when and where they watch their favorite

shows. the roku player is a set top box that streams movies you tv shows, music to tvs via a wifi or ethernet connection. we are joined this morning from mountain view, california, by anthony. good morning to you. >> morning. >> business come a long way since you decided you wanted to watch "star trek" the next generation when and where you wanted to watch it, right? >> yeah, the world of tv is changing a lot. we are seeing a huge shift of tv distribution shifting from, you know, first it was over the air, then it was cable and satellite and i think the next few years, most tv distributed over the internet, a big change and create lots of opportunities for companies like roku. >> where do you place yourself in the battle for that real estate when it happens? we know it is getting closer and closer all the time. people often want to compare you, make you and apple the coke and pepsi of this race. is that how you see it? >> yeah, if you look at the

way -- if you believe that tv is moving to internet distribution, which of course we do, the next question is how is it going to get to your tv? and if you kind of look at the growth of various ways of getting to the television, we believe that it will be streaming players, which are like roku and apple and smart tvs. those are the two ways most people will end up watching television distributed over the internet. in the smart -- in the streaming player space, we compete with apple. you go to the aisle of best buy, you can find these kinds of players, a bunch of different boxes there literally 90% of the market is roku and apple tv and we split the market roughly 50/50. and there's various reasons some people pick apple a lot of people pick roku. on black friday, we had a huge black friday, selling a roku every second on black friday. we are having our best quarter ever this year and, you know, the platform is doing really well >> >> anthony, you talk about the market, what does that mean as a percentage of actual tv owners,

because it seems like a lot of people even have internet-enabled tvs but don't necessarily auto know how to use them. just wondering what the pep station across households in the u.s. >> there's a lot of internet tvs out there but most people, like you said, don't actually use them for streaming. roku players, for example, if we survey our customers, we find that 55% of roku players' customers have access is to the internet over other ways, for example, a very popular one is internet tvs. but today, those tvs have been difficult to use and lacking. for example, a roku player has over 600 channels, adding a new channel every day. most internet tvs really only have a few channels, like netflix. in fact, we think there is a huge opportunity to expand our platform from streaming players, where we are, you know, a leader today into tvs, an area we are putting effort into with our roku ready program. you will see a bunch of tv

manufacturers on the floor showing roku ready-ready tvs and think a big opportunity to improve the quality of the experience on those tvs and get them to start being used more. >> spent time at netflix, left when it looked like they were not going to build a box themselves, you did it on your own, a fair amount of success. as we watch the move around the stock and hasting yous strategy and international and subgrowth, ebb and flow, i wonder whether you think they have gotten a fair shake from the markets? are they doing things right or not? >> i think that if you believe, like i do that all tv is gonna move to internet distribution over the next few years, then companies like netflix have a huge opportunity. there is stale lot of customers that haven't signed up that should be watching netflix. so we are very bullish on netflix. but we think other kinds of content as well besides new-rance like netflix, existing brands of content will move to

internet distribution as well and that is to expand the market a lot. >> gain that penetration of significance in terms of internet tv, as you well know, i'm sure, providers of content trying to keep that bundle together, the bundle of programming we all pay for to our cable operator. when does the bundle break apart, in your opinion? >> you know, i get that question a lot. i don't think the bundle is really going to go away any time soon. even if you think about brands like netflix. netflix is essentially a bundle of content, right? it is a bundle of -- some new shows but a lot of catalog and tv bundled into a subscription package. customers like bundles. i think perhaps the cable industry has sort of started overbundling. the trend we will see as there is competition, the internet, of course, creates competition. there's new companies like netflix and new brands like revision three and other content companies creating content just for the internet.

all that is creating more competition but not going to cause the bound toundle to go a. you will see the fraying of the bundle, less expensive bundle options and of course the question in a lot of the industry will wonder, when will there be a virtual mso? when will you go to best buy, buy a roku player, hook it up and then not only sign up for netflix and hugh lieu and hbo but a $30 a month sort of virtual cable pack arrange the big question and i think that is coming. whether it's next year or not, we will have to see. >> as long as cnbc is included, we have no problem with any of that. anthony -- >> you >> fascinating stuff. we can talk about it all day of course but please come back. thanks for your time. >> thank you. >> well, back to the negotiations out of washington, as plan b gets put to the test in the house today. how will it affect or markets.

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exchange for this thursday. hey, rick. >> good morning, carl. everybody's talking about what's going on for the end of the year. and being an interest rate guy always first, i really find it fascinating because there are so many traders, economists, analysts, as jim bianco, my friend and better economists in my opinion has talked that the end of the treasury rally has been predicted many times and all those who did predict were wrong. is this the beginning of that? well, we do have a chart. this isn't a super enlightening chart, but i find it enlightening. this is the difference between our ten-year yields and ten-year bu nds.

conventional wisdoms become pretty much ear marked as gospel these days in the marketplace, that we are going to see a lot more selling. well, we didn't get up to unchanged on the five year, didn't get up to unchanged on the ten-year. we did on the 30-year. many believe when we come back next year, it's going to be a better core elation between the bunds and you'll see greater opportunity to buy. just my opinion but consider the landscape of uncertainty and it's still out there. and some of the numbers today, whether it was gdp or philly fed, there's a reason to think the fiscal cliff is altering a lot of dynamics that were pulling forward growth that we're not going to like as we get into the first and second quarters of next year. everybody yesterday and today is still talking about the libor settlement, ubs, barkleys.

i can't get over the fact that many. world's most powerful central bankers knew of some of the improprieties regarding libor before the ' 08 crisis. but did they do anything about it? no. i just can't believe scott free, my last observation. i think the backup plan for all of these programs might have to do with something to do with "time" magazine. they say 12/21/12 at 8:00 a.m. gmt, well, it might be the end of the world, right? maybe that's the fall back plan. maybe that's why nobody's looking at the fiscal cliff. so i started to think, greenwich meantime. but i was wrong. i guess it's global mayan time. if anyone knows when that is, send me an e-mail. >> coming up, representative

cantor speaks on the fiscal cliff. and we'll talk to jock kingston of georgia in the next hour. stay tuned. ♪ [ male announcer ] this is karen and jeremiah. they don't know it yet, but they're gonna fall in love, get married, have a couple of kids, [ children laughing ] move to the country, and live a long, happy life together where they almost never fight about money. [ dog barks ] because right after they get married, they'll find some retirement people who are paid on salary, not commission. they'll get straightforward guidance and be able to focus on other things, like each other, which isn't rocket science. it's just common sense. from td ameritrade.

i want to point out bank of america today's session, it's outperforming as well as the markets. up almost 2%, close to a 52-week high. really hoping the overall markets hug the flat line at this point in the session. >> what are you going to watch tonight, besides nike, besides rim? >> we're going do all of that. we're going to pick apart that interview and see what's the deal with the herbal life trade, whether there are other stocks falling in a similar pattern to herb al life because of this multi-level marketing scheme they have going on. >> david, you're not going to go too far? >> no, we'll recap this morning. if you're just tuning in, here's what us missed earlier on. welcome to hour three of "squawk on the street."

here's what's happening so far. >> it's kind of sad to see what was once the premiere exchange in the world now selling for what is a relatively low price compared to its historic value. >> it is now official. we can tell you the nyse is going to be purchased by ice. >> what do do you about the idea that a 12-year-old company is taking over a multiple hundred-year company? what do you do, by the way, with this, what is all around us? is it just expensive overhead? >> it may be overhead and it may be expensive but it's not going anywhere. >> nyse is expanding the ice board to 15 from 11. this is not an acquisition. it is not a merger of equals. >> i think in the environment where scale continues to

imperative and we thought consolidation of inevitable, why not team up and see if we can o dodo it. >> the "squawk on the street" countdown to christmas is in its final week. are you ready? ho, ho, ho! good thursday morning. live here at post nine of the new york stock exchange. let's get a check on the markets. s&p on the other side by about a point, 1436 at last check and the nasdaq is down about 3.5. carmax up sharply today after reporting a quarterly profit above estimates as a rise in supply and more attractive financing options helped the retailer sell more cars. meanwhile, bed bath & beyond did

miss expectations. house speaker boehner's plan b is up for a vote today, likely tonight in the house but will not get past the senate in all likelihood. our chief economist is here to explain what the fiscal cliff discussions may mean for next year's economic outlook. plus we'll talk to one congressman who plans to vote for plan b. congressman jack kingston will join us live. and the t. rowe price chairman will tell us what the fiscal cliff means for your company. >> in washington the gop-controlled house set to vote on speaker boehner's plan b. the white house has said it will veto that plan and house majority leader eric cantor is expected to speak there.

that live shot. we'll bring you those comments as soon as they again. in the mean team, john harwood is live with how that might actually go down. john? >> we talked about the republican goal is to push pressure on the white house, to remove a political vulnerability, remove the democratic charge that republicans are simply protecting millionaires. i want to talk about the democratic point of view. democrats say this is a waste of time because, as you noted, the president would veto it and probably wouldn't get through the senate in any case and it's only a matter of time before we get back to negotiations. chris van holland, the ranking democrat on the budget committee, former chairman of the democrats' campaign committee said there's a method to john boehner's approach here, which is he's trying to put off the ultimate resolution for a specific reason, keeping his job. >> he also a to face an election in his caucus on january 3rd in order for him to continue being speaker. and if he alienates a whole lot of members of his caucus, he

doesn't have to alienate that many. if he loses 17 members or less of his caucus, he risks not being reelected on january 3rd. >> that's one perspective on why john bain are may be taking this approach. i've talked to republicans close to boehner and outside the government as well. they don't think that john boehner is doing it for that reason but they do think he's got to go through this exercise in order to placate his caucus, which is resistant to the tax increases as a step on the way to an eventual deal. we see what eric cantor has to say in a few minutes. he has been in the past more conservative than boehner and put pressure on him. he's being a good soldier now, by all accounts i hear sticking close with boehner on republican strategy, carl. >> why is it wrong to suspect that a deal comes on january 4th once that speakership is affirmed for baoehner? >> i think his position is

secure. i don't think he's likely to be ousted as speaker. i think there's a reason for the deal to happen after january 1st, tax rates will have already gone up by then and republicans would find it easier to do to do what grover norquist has said is not a tax increase, to say taxes are at a certain level, i'm voting to cut them for some people. might make the deal easier to go down. >> it all depends from which end you're looking at it. >> exactly. >> we'll come back in a few minutes to the leader. in the meantime, one economist is concerned about the payroll tax holiday, which is also set to expire. he says this is where the bulk of near-term damages to the economy will come from, even if the cliff itself is avoided. tore porcelli joins me here at post nine. what exactly do you mean? >> what's interesting is most people in the media, even analysts, i think they're really focused on the bush tax cuts.

i don't know why, it makes for better headlines maybe. if the payroll tax goes away, if it's not extended -- >> which was a temporary band-aid during the crisis. >> exactly right. it was first instituted a couple years ago and extended at the beginning of this year. now it's up for renewal at the end of this year so in a couple of weeks. >> if that is not extended, what's going to happen is anyone who takes home a paycheck will get hit by that. so thought of sort of slightly in math terms, it will hit the average household by about $2,000 a year. that might not sound like it a lot but it's about $200, about $167 a month, real money to most people. what's interesting about this whole conversation is even if we talk about the bush tax cuts and raising taxes on the wealthy, at the end of the day, it's the wealthy that have the bulk of savings so they can support current consumption by drawing down savings.

those not classified as wealthy, they don't have that ability. if that money goes away, you will see some hit. >> and what indicators would reflect that first? claim -- >> retail sales would be the first to be impacted by that. you'd see it in chain store sales. consumption will see a hit from that. it's one of the reasons why we built in a soft first quarter for 2013. >> is part of the thinking that business, anticipating that weakness from the consumer, will start to make cuts in front it have? >> what's interesting about this, i'll spin in a slightly different direction, there's no question the fiscal cliff has already impacted the business mindset. you can see that play out in the confidence reports as released to business, you can see it in the new orders index, now below it's approaching break even. if you look at the hard data, the hard data has already started to soften. from our perspective, if cap-x

is starting to slow down, that does not beget more hiring. so that would suggest to us that you're probably approaching the peak in terms of hiring, if it's true that the cap-x side of the esituation is starting to lose team. it's not just about the fiscal cliff. everyone wants to say the reason why it's not moving along is because of the fiscal cliff. there's so much more than that. if you look at the corporate quarterly earnings calls, they've been clear that cap-x is being reduced because of the fiscal cliff but also the global malaise we're going through. make no mistake, the global malaise is here. two-thirds are still in contraction territory. it's difficult to disentangle those ideas.

>> i know it's three months old but today's number was pretty good, philly fed not that bad and in the midst of all this uncertainty. what's that about? >> we're not painting a picture of an economy that's about to fall off a cliff. we're talking about an economy that's just slowing, that's not going to gather much momentum. that's for us the compelling part of the story. we built in a softer pro vile 2013 versus 2014 but you're looking at 1.5 to 1.7% growth. that's still consistent with philly fed. we are just not gaining momentum. >> just to put a period on it, hopes for three you think may be a little aspirational? >> i think on a consistent basis we're going to be waiting a long time for that. you need to see the credit channels start to open up and job growth start to accelerate.

when you see job growth start to accelerate, that's when wage gains will come back and be part of the picture. in the absence of that, not going to see consistent three handle for a while. >> cruise company carnival out with earnings this morning. want to seasoned it offer to brian sullivan for a market flash on that. >> not great news for carnival cruise lines. you've got slower revenue growth there. they've still been impacted by the nearly one year ago capsizing of the costa concordia. it's still out there in the public. every once in a while i start to see the ship again on video, still where it is. so can val being incumbent patted by that. the stock down by 5.4% here. the demand fell off right after january when that tragedy occurred and hasn't yet recovered, though carnival did say bookings are starring to pick back up slowly.

lower profits holding back carnival cruise line today. >> good to know. >> nyse agreeing to sell itself for rival intercontinental exchange. we're going to get all the details and a recap of what duncan and mr. spreker said this morning. first rick santelli is working on something for a little later on. >> in about ten minutesing ing' going to be interviewing one of the smartest people, dr. kenneth rogoff. and the topic ought to be something like, yes, maynard taxes do matter! ♪

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and if i do say so myself, i have never looked better. superderivatives introduces dgx. data done differently. another morning, another day of waiting for leadership. majority speaker cantor is expected to start speaking at any time. it may be the last comments we get before the house votes on this plan b tonight. we think the vote will come at about 7 or 8 p.m. >> continental exchange buying nyse. >> of course a large deal and certainly one that is reverberating right down here on

the floor. worth about $33.12 a share. at least it was at the outset of trading this morning. ice shares down a bit overall but again cash and stock, two third will be in those ice shares. a very height multiple stock that's been rewarded as a result of its growth and acquisitions since the company went public back in 2005. people may not be that familiar with the name but they probably will be now. one of the keys to this of course, there a number of them. has to do with perhaps slowness in the cash equities business and it is a lot about uniting platforms that deal with energy, commodities. obviously agricultural instruments, credit and derivatives of all of those kinds of instruments. that's where a lot of the money is. margins at ice even better. hence while the two companies have very similar numbers when it come to ebidta, you get a

higher multiple at ice. did not have an opportunity to talk to both the men behind this deal. jeff spreker runs ice and will be the ceo of the combined company. the ceo of the new york stock exchange will remain in that role and be president of the combined company. haven't come up with a name yet. and cost synergies, about $350 million in new synergies, if you will. i asked where will that money come from and how many job cuts are going to be part of that if. >> we don't need two boards, two auditors. a lot of the corporate costs will fall out as they do in any merger. you're not going to hear us talk about job cuts. it's not about that. >> ice said it maintains its commitment to keep this floor open, this building open.

they'll have dual headquarters in atlanta and here as well. it's important having that prosence of cross product groups both here and internationally. not expected to be a problem on the anti-trust front. our viewers may recall the deutch deal didn't make it through. here it's not expected to be a significant anti-trust risk whatsoever. >> two players who know how to do things on both sides of of the pond. that's interesting. i thought duncan's point was interesting. even though regulators and public opinion pushed back some of the past deals doesn't mean you got to still try to find way to consolidate in this business. nd of story. >> end of story. and he's been determined to do that. we know that from all the different things they've looked at. in the press release they do also talk about other alternatives that were at least

considered. not sure what they were. they did not much up to what they felt was the value of the deal. >> thanks for that. here's leader cantor. >> with responsible cuts that protects our national security and adds an approximate $200 billion in additional savings for deficit reduction. now, the bill is designed to stop fraud, eliminate waste and frankly to replace the sequester that is indiscriminate in its cuts, aimed at trying to promote national security but also to drive towards the underlying issue that faces this country, which is the mounting deficit and load of debt that we're going to leave this generation and the next. we are committed in the house, as you know, to address the underlying problem, which is the spending. and that's why we're bringing this bill forward. together with our vote today to extend permanent tax relief in

the middle class, for the middle class and small businesses, we house republicans are taking concrete actions to avoid the fiscal cliff. absent a balanced offer from the president, this is our nation's best option. and senate democrats should take up both of these michiganiers immediately. and the president has a decision to make. he can support these measures and being responsible for reckless spending and the largest tax hike in american history. >> first off, do you think you have the votes to pass it? >> yes, we're going to have the votes to pass both the permanent tax relief bill, as well as the spending reduction account. >> are you worried that by having your members vote on this $1 million cutoff, you are binding them to that and making it more difficult to negotiate with the president? >> our members understand that the nation faces the largest increase in its history come

january 1, 2013. this bill is a bill that provides permanent tax relief for taxpayers earning $1 million and under. we protect 99.81% of american taxpayers from a tax increase in these very difficult economic times. we hope that the senate will take this bill up along with the spending reduction act and get the job done in lieu of or absent any kind of agreement coming from the white house. we are again taking concrete actions to avoid the fiscal cliff. >> mr. leader, i know that this bill last night, the deal of sequester mirrors a piece of legislation that was on the floor earlier in the year. why was that not made immediately part of plan b sin there was such a cry from your conference that the initial part of plan b did not deal with the sequester and this added in such

a rushed fashion? >> our members have been consistently focused on addressing the spending problem. as you know, last year we have focused primarily on trying to address the unfunded liabilities of this federal government. we're committed to actually fixing the problem here so we can get on about a growing economy. we also realize that the president's unwillingness or inability to come to a balanced agreement with our speaker presents us with very little option other than to try and work hard to avoid a tax hike on some millions of americans. that's why we were pushing forward and are on the perm nngt tax relief bill in plan b. but we also know very well that revenues are not the issue here, it is spending. you know, you look at the size of these bills. even the size of the bills over being discussed at the white house. this is just the beginning and a down payment -- >> john harwood joins us.

you heard him say they had the votes. i guess i'm wondering do you believe him and if that does pass tonight, what happens next? >> i do believe him. it's always possible things could break down. the reason that they added the spending cut bill to the mix, the $200 billion, is to make sure it passed because you had a lot of conservatives saying, hey, wait a minute, why are we raising taxes on anybody for a bill that doesn't have spending cuts? they added that to get them over the hump, get the 218 votes. i assume a level of confidence in their whip operation and they can pass it. they may leave town, the senate said they'll leave down, they'll come back after christmas on the 26th or 27th. they will see and everybody recognizes this plan b is not going to become law. then you'll have a resumption of

negotiations over a large deal and if a deal can be struck, they'll pass it. if not, i think the administration is willing to go over the cliff having won the election, having offered what they think is a balanced plan and then believe that the greater heat will fall on republicans and we'll see what happens after january 1st. if it comes to that. >> do you believe, then that, we are entering a window, at least to next thursday, the 26th and 27th, where nothing happens? or is a plan a still happening somewhere under the radar. >> the latter. i think what is likely to happen is the house will leave. that always makes it a little bit easier for john boehner to talk to the white house because he gets so much heat from his members about things that are unpopular for them. this is a very small group of people making these decisions and they've got to figure out how they can orchestrate the followers to get to 218. that's an issue for the president, so a bigger issue trying to get his republican

caucus, a sufficient number of them to support a potential deal. what i would envision is the dock leaving but the leadership staying. the president of course is going to be here. they will have some talks over the weekend and perhaps when members come back on the 26th or 27th, they'll be presented with certainly they can either accept or reject. >> interesting. as usual, john, the market is absolutely paralyzed, does not know what to make of any of it. the dow down 2 points. when we come back, former chief economist for the imf ken rogoff will weigh in. and financial and consumer staples performing the best today. tech and discretion riff spending lagging right now. be right back.

ally bank. why they have a raise your rate cd. tonight our guest, thomas sargent. nobel laureate in economics, and one of the most cited economists in the world. professor sargent, can you tell me what cd rates will be in two years? no. if he can't, no one can. that's why ally has a raise your rate cd.

ally bank. your money needs an ally. welcome back to the third

hour of "squawk on the street." rick santelli here in the wonderful city of chicago. if fiscal responsibility was a religion, then i think that the world is engulfed in atheist economists. we have dr. kenneth rogoff on. he co-authored a working research paper titled "debt overhangs past and present" and his research is so enlightening. talks about going back to 1800. there have been 26 episodes where debt-to-gdp reached 90%. there is something magical about 90%. let's welcome dr. rogoff. welcome, sir. >> greetings. >> i would like to you give us a bit of a summary. in your paper you pretty much knock my views but you knock the

john maynard kazen views as well. >> they don't matter that much and it's hard to show an effect on growth. but when your debt level gets over 90% or 100% of gdp, it's not a precise number but a good benchmark historically, it's associated with slower growth for a very long time. this doesn't happen that often. there are only a very limited number of ep soeds across advanced economies since 1800. a lot of these episodes were before we had social security and medicare and these other things that are similar problems. so, yes, it's right to worry about the debt. it's not a free lunch at this point. that doesn't mean that we should just, you know, try to go into deep austerity and get rid of our debt problem right away. we're in a very slow growth

situation. that would not be wise. but i do think it's sensible to talk about a gradual tightening, which is hopefully what will come out of this deal, at least for a little while. >> all right. well, you know, the u.s. is getting close. wl when you say 90%, you're talking about debt that's being held by the public, not about debt hanging out on a fed's balance sheet. exactly how much growth are we talking? can you quantify that for me, sir? >> well, the fed's balance sheet counts when it's issuing short-term debt and buying long-term debt. the treasury owns the fed. that's a bit of an illusion. the effect on growth, again, this is an association. there's a lot of qualifications. but the slower growth averages about a little over 1% a year and the average episode lasts more than 20 years. that was in my research with

carmen and vincent reinhart. if you're running it out 20 years, 25 years, you're a quarter lower on your output than you would have been. it's a big deal. it's not the only thing go on. it depends on what kind of innovation you have, infrastructure. there are things can you do to try to mitigate it but having a high debt level out there limits your options. if you have problems in the future, eventually there's tightening. we don't understand the reasons exactly but it's a pretty strong association over time. >> doctor, we only have a small amount of time so give me this one quick. you know what i find fascinating is a lot of your examples in the past i don't believe had the uniqueness of what we're say zing today, artificial live low interest rates for an issue that isn't so much about credit versus a safe harbor. well, let's put the money in treasury, relative safety. how do the low interest rates in this time stand out from some of your other 26 episode do they?

>> one of the surprising things is they don't stand out as much as you think that, almost half the time during these episode, interest rates were very low and growth was very slow. >> we're going to have to stop there, doctor. and i do apologize. but, please, work on some independent research that will prove one way or the other whether the fed's quantitative easing programs have impacted in any positive way unemployment. i haven't seen any independent research that does. thank you for being a guest today. carl, back to you. >> thank you so much, rick. when we come back, t. rowe price chairman brian richards is with us. back after a quick break. ♪ [ male announcer ] the mercedes-benz winter event is back, with the perfect vehicle that's just right for you, no matter which list you're on. [ santa ] ho, ho, ho, ho!

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we're seeing the dow decline a little bit after the comments from leader cantor. >> if it wasn't for all this fiscal cliff stuff, this would have been a pretty good morning because we had excellent economic news this morning. the gdp revision was excellent, existing home sales, the best since november 2009, and we also had home prices moving up. overall very good numbers. but you see we're in a very narrow trading range and after representative cantor's press conference, we're moving down. this is not a particularly day where you can divine a lot about what's going on from the stock market. either side of positive or negative on all of the major sectors right now. i got some questions about the

new york stock exchange and the price today because we're moving down, as soon as the deal was announced, the deal was 3d$33.1 and now is about a 5% difference. i don't see anything unusual that it's trading below the offering price. let me move on and talk about allocation. we've talked a lot about the idea that maybe out of bonds and into stocks would be a real motif. we saw a few days in the middle of december where that looked like it was happening. i looked at the recent mutual fund flow numbers, for the last couple of weeks, we're still getting big outflows from stock mutual funds and big inflows into bond mutual funds. you think the public would start getting interested. they aren't. this is four years running now. this is for mutual funds, not

exchange traded funds. exwets about $134 billion and bonds have had $300 billion in inflows. there's still no signs that this trend is changing in any way. outflows from bonds and stocks, inflows into bond funds. one day i will report this has changed. i was hoping i would do it earlier. i am not able to do that. >> it's the slowest rotation in all of mankind. >> agonizing. >> tom obama administration officials met with eight blue chip leaders at the white house yesterday. the president and his adviser have been seeking advice interest corporate leaders. obama said yesterday talks with speaker boehner were deteriorating. a member of the ceo fiscal leadership council of the campaign to fix the debt, he

joins us now. when you're on fix the debt, it must be doubly frustrating. what's your latest take? >> well, as we all know, the situation is very fluid. to me it appears as though there has been some signs of progress on both sides both in terms of speaker boehner's involving position, i think the white house position has been evolving. you sense there is a framework for a deal to be done. we hope partisanship doesn't torpedo the entire series of conversations but it feels like the two sides are close enough that there ought to be a deal that can be cut. >> so the detour that we've taken over the past 48 hours with regard to plan b, is that a political tool or do you believe that is actually a road that leadership wants to go down if they have to ? >> i think everything at this point is a political tool. i think both sides should want a

deal. investors want a deal. the american public wants a deal. folks have to sit down and get together and get at that deal done. on the revenue side you see the two sides are fair live close. on the spending side they're not that far apart. if this were a business deal, you could negotiate an outcome. >> you just heard bob passani talking about some of the outflows we continue to see. the continuation of that story where equities were, some would argue, an underappreciated asset. owned we get some mna heating up at the end of the year. how does that change the investing landscape for 2013? dramatically or have we already sort of gotten there? >> i think in part we gotten there. i this i investors are still frightened after 2008 and 2009. earnings performance has been good, dividend performance has been good this year, the wek it

indices are up. the markets have done better than people feel. and like carl, i hope someday i can also report equity flows have turned positive and fixed income turns have turned negative. investors at some point will look a little bit backward and be willing to accept a little more risk. >> we have this nyse deal with intercontinental exchange, sprecher said they believe there's a tremendous upside of equity down the line. for them to plop down $8 million, it's putting your money where your mouth is. >> everything is cyclical. at some point we'll see the equity cycle resume. >> brian, thanks for your time. we'll see what the next days bring in p. thanks very much.

>> same to you. >> when we come back, we'll talk to one of the congress people who plant to vote for plan b. and eric schiffer on the discount side of the street. more to come on "squawk on the street." by keeping my airways open for 24 hours. plus, it reduces copd flare-ups. spiriva is the only once-daily inhaled copd maintenance treatment that does both. spiriva handihaler tiotropium bromide inhalation powder does not replace fast-acting inhalers for sudden symptoms. tell your doctor if you have kidney problems, glaucoma, trouble urinating, or an enlarged prostate. these may worsen with spiriva. discuss all medicines you take, even eye drops. stop taking spiriva and seek immediate medical help if your breathing suddenly worsens, your throat or tongue swells, you get hives, vision changes or eye pain, or problems passing urine.

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be with us first. and we're live as the house prepares to vote on speaker boehner's plan b. and gus sauter's final interview before he retires. >> earlier representative cantor commented on the house bill. >> we house republicans are taking concrete action to avoid the fiscal cliff. absent a balanced offer from the president, this is our nation's best option and senate democrats should take up both of these measures immediately. >> congressman jack kingston of georgia said he plans to vote for this tonight. he joins us from capitol hill. good morning to you. >> good morning, carl. >> why are you voting for it and how much arm twisting did it take? were any of these revisions

necessary to make it clear in. >> no. i think one of the problems in solving the fiscal cliff is that it has been a centralized debate. harry reid is only a point man for obama. he's practically been irrelevant. this place operates best when it is decentralized, not centralized. putting a bill in front of the house, one will have a democrat tax cut version and another will have a republican and we'll have another spending reduction bill, i think that gives 435 members of congress an opportunity to have a stay so, talk about amendments, talk about what they wish they would have had in the bill and then it gives the senate an opportunity to act like a separate branch of government from the white house and they can move this legislation, they can amend it or whatever but i think america operates best when the 535 members of the house and senate work together on behalf of representative government rar than have a centralized two-person debate.

>> right. but we know there is the likelihood of that two-person debate will continue. are you comfortable with the speaker and the president going ahead even in the face of this bill today? >> yes. om not being idealistic. many people are voting no because this just isn't good enough but in the art of compromise, in a split government you've got to start moving legislation. and i think this puts the ball in the senate court and bring it is to the legislative branch of government to come up with a solution. and then if in addition to that the president and speaker obama come up with another idea, i think that's encouraged. >> how much leash are you giving the speaker? does he have your automatic proxy or is there something he

could do at the table with the president that would force you to vote against his speakership again? >> i think if john boehner came back with a deal that cults taxes today and postpones spending cuts to an indefinite time in the future, it would be very difficult for me and many other members of the house to vote for him. but that is not what he's talking about doing. he's talking about revenue increases matched by spending cuts on a realtime basis, which is what we have said all along. >> finally, just your travel plans. they're all over the map in terms of what house staffers are going to do. are you going home this weekend or not? >> carl, i'm sending my family home. we're half in georgia and half in washington. i brought my stocking up here. i'm hanging it up christmas eve. i'm not counting on getting anything but i'm going to give it my best shot. i'm not leaving town, though. i want this deal done. >> congressman, thanks for your time. really appreciate that. >> it is the epitome of discount

holiday shopping and 99 cent only stores looking to draw in shoppers not just with low price bus with its layaway plans as well. the ceo will join us to tell us how they're capitalizing on shoppers and last-minute shoppers as well. let's give thanks - for an idea. a grand idea called america. the idea that if you work hard, if you have a dream, if you work with your neighbors... you can do most anything. this led to other ideas like liberty and rock 'n' roll. to free markets, free enterprise, and free refills. it put a man on the moon and a phone in your pocket. our country's gone through a lot over the centuries and a half. but this idea isn't fragile. when times get tough, it rallies us as one.

every day, more people believe in the american idea and when they do, the dream comes true. we're grateful to be a part of it.

we have some more on this nyse/ice deal this morning. maria joins us on the phone with response from other corners.

good morning. >> thanks very much. this is really playing out interesting. i have learned that the nye group has had discussions with the cme group which may have accelerated the deal with ice. the question is will the cme group come in and try to break this up. my sources are telling me it's unlikely anybody else comes in here and the reason is because of another deal that was done today which is really not being talked about and that is the clearing agreement between ice and nyse. so what made this deal possible is the fact that there's no overlap here. the nyse does not have a clearing business in europe and ice does not have an equity business.

so this will likely go through with regulators. the two have agreed the ice will clear in the nyse in london for the european futures and derivatives business. that's really what the jewel of this deal is. with this in effect, duncan doing this deal has basically, you know, locked it up, putting a limit on any other players coming in and wanting to pay up because nobody's going to try to come in and try to break this deal up because of the clearing business. it's clear they won't be able to break up the clearing agreement which is in place and makes trying to break this deal up way too expensive for anybody else. sources have mentioned the cme to me, as well as the hong kong exchange as players who may want to try and break this up. but, again, my sources say no way they're going to do that because of this clearing agreement that has been done and is in place. >> that is fascinating, maria. it does appear to have been

cleverly constructed. hard to imagine that the cme is going to take this lying down. you got to think they're going to respond but nobody knows just how. >> we don't know how. it's going to be too expensive for them to come in and break up this deal. you have to wonder what is does nasdaq do now. the derivatives, the futures business, that's where the money is. basically taking on the new york stock exchange, you're taking on the euro business. the equities business has been declining. it's really the futures business and the derivatives. that's the jewels, that's what you want to look at in terms of crown jewels elsewhere and who might be the other attractive players at the table that are the takeout targets. >> interesting way to move that

ball forward, especially with the news that there were these discussions in the prior days with the wme. >> thanks so much. >> christmas now less than a week away. retailers preparing for this weekend's last-minute rush. our court any reagan is here on post nine to talk about one of the categories everyone is talking about. that is stocking stuffers, tiny things you open at the very end or very beginning. >> that's right. you're getting close to the end here. on our all i want for christmas segment, we're talking about gifts you can buy for under a buck. we joined by eric schiffer. i understand today is the grand opening a new store location. that makes 308 for you. is that right? >> i think 310. we on our way to 999 someday hopefully. >> that's great. last holiday season your same-store sales up about 6%.

this year up about 4%. >> so far it's been good. and we're optimistic that we're going to have a very good holiday season. >> so you think it could be on par or better than last year? how does it compare to last year? >> well, we're not really allowed to comment on numbers going forward. but, you know, we -- like you said, the first half of the year we were in a little bit above 4% and we're seeing similar trends. >> okay. so more than half of 99 cent only sales come from food and beverage. how are you concerned about, say, a walmart or a target as they really ramp up their grocery offerings and their scale is just so much larger than where you are right now. how do you deal with that competition? >> well, we love competition. 99 cents only store is known for being very flexible and biography opportunistic purchases. we buy things at the last minute when manufacturers or in this case growers of produce

overproduce. so right now we have, you know, this is a huge box of organic spring mix lettuce, we have an art choke. you're not going to find these things for a dollar anywhere else at walmart or target or any supermarket. and you never know what we're going to have. that's what makes our store exciting. we say to folks save more, shop us first. >> i'd like to ask you about your consumer. you've said before that your beverly hills location is one of your better locations when it comes to sale and you're looking for a property on rodeo drive. are higher income americans looking to buy items at your stores? >> definitely. we've seen especially since the recession hit, more and more upscale folks come and see what the fuss is all about. they've driven by our store many years and seen lots of cars in the parking lot and more and

more have come in. just you talk about stocking stuffers that an upscale person would like. these are double walled coffee mugs. they're $3.99, $4.99 at target and walmart. we're 99 cents. we have our fingers and toes crossed we can find a lee case on rodeo drive. >> a quick question then about the layaway plan. if you've got this higher income consumer and most of your items are 99 cents, do you really need a layaway plan? are consumers using that? >> well, most of the retailers as you know came up and reflounced or introduced layaway plans this year. so we wanted to be with them so we flounced one. i don't know how many of our consumers are going to want to come in and put down an umbrella and put down 69 cents and pay a

nickel each week. we offered it. next year we plan on introducing a bridal registry. >> how many props did you bring? you must be surrounded by products. that's got to be the first time anyone has held up an artichoke next to their head in the history of our air. >> well, there's a history for everything. good to be known for something. >> yes, yes. >> that's all we have time from before, eric schiffer. >> brian sullivan is here with a market flash. >> you want to take a look at these names. i know in the wake of the newtown tragedy, there's been new focus on video games. you've had prominent politicians and others calling for more overseeing of video games. the piper note actually a little different. that's